PetroChina looks to add to US$3.7B in Australian deals

PetroChina Co., the nation’s biggest oil and gas producer, is looking to make more deals in Australia, adding to about US$3.7-billion in acquisitions as part of a global drive to feed surging Chinese demand.

“As one of the key markets in our Asia and Pacific operations, PetroChina is willing to expand our presence in Australia when a good opportunity arises,” Mao Zefeng, a Beijing-based spokesman for the world’s second-biggest energy company by market value, said in an e-mail to Bloomberg.

PetroChina, planning to invest at least US$60-billion this decade in global oil and natural gas assets, agreed to pay BHP Billiton Ltd. US$1.63-billion in December for a stake in the proposed Browse liquefied natural gas venture in Western Australia. China’s overseas oil and gas acquisitions reached a record last year after the government said it would boost funding for energy investment to secure long-term supply.

“There will be more M&A to come as Chinese companies look to secure long-term resources positions to meet future LNG demand,” said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. “China remains confident in further long-term expansion in Australia.”

PetroChina shares have dropped 5.2% in Hong Kong trading in the last 12 months, compared with a 9.8% gain in the Hang Seng Index. PetroChina traded at HK$10.92 at 10:30 a.m. local time. Exxon Mobil Corp. is the world’s biggest energy company by market value.

With seven LNG developments at a cost of US$190-billion under construction, Australia is set to surpass Qatar as the world’s largest LNG supplier by the end of the decade. Global oil and gas companies from Chevron Corp. to Statoil ASA are also seeking to tap Australia’s shale gas resources, ranked as the sixth- biggest potential reserves in the world.

‘Long-Term Game’

The publicly traded unit of China National Petroleum Corp. last month agreed to buy a 20 percent stake in the Poseidon natural gas discovery off the northwest coast of Australia and a 29 percent interest in the Goldwyer shale project in the onshore Canning Basin from Houston-based ConocoPhillips.

“This is all about a longer-term game,” Adrian Wood, a Sydney-based analyst at Macquarie Group Ltd., said in a phone interview. “When we run our numbers, China looks pretty-well supplied with gas until 2020. It’s the resources that are important to them, not the production right now.”

Rival Chinese companies also are buying up in Australia. China Petrochemical Corp., known as Sinopec Group, is a partner in the LNG development on Queensland’s Curtis Island being built by ConocoPhillips and Origin Energy Ltd., while China National Offshore Oil Corp. agreed last year to pay $1.93 billion to increase its stake in BG Group Plc’s LNG project.

Woodside Project

PetroChina last year acquired Melbourne-based Molopo Energy Ltd.’s coal-bed methane holdings in Queensland state for A$43.4 million. The Chinese company plans to supply the gas to Liquefied Natural Gas Ltd.’s proposed Fisherman’s Landing export venture, the Perth-based company said in August.

The transaction with BHP to buy part of Woodside Petroleum Ltd.’s Browse project is expected to be completed in the first- half of 2013, Melbourne-based BHP said in January.

“We respect what PetroChina can do, and we respect their investment philosophy in Australia,” Woodside’s Chief Executive Officer Peter Coleman said in a Feb. 21 interview in Sydney. “Having a player like them gives us a window into one of the largest growth markets in the world.”

Mozambique Gas

PetroChina and Royal Dutch Shell Plc jointly acquired Australia’s Arrow Energy Ltd. in 2010 for about A$3.5 billion. The companies through the Arrow venture plan a fourth LNG development on Queensland’s Curtis Island following projects by BG Group, Santos Ltd. and ConocoPhillips. The PetroChina-and Shell-owned company also bought Bow Energy Ltd. in 2011.

Shell said last year that it may delay a decision on whether to go ahead with the Arrow LNG venture until 2014 amid rising costs in Australia and that it was studying plans to combine its Arrow gas resources with third parties.

The PetroChina deals in Western Australia show that the company wants to diversify its interests in the country away from Queensland, said Anthony Patten, a Perth-based partner and energy specialist at Allens, the law firm that represented Shell in the Arrow takeover three years ago. Shale in Australia is one area that may attract Chinese companies, he said.

“They are trying to get a position in all parts of the sector and they certainly don’t have limitations in terms of cash,” Patten said in a phone interview.

‘Cautious’ Stance

While PetroChina is considering further energy investment in Australia and seeking to gain LNG experience in the country, the company is taking a “stable and cautious” approach after gains in the Australian dollar, spokesman Mao said on March 6.

The acquisitions in Australia are part of a global strategy. CNPC is in talks with Eni SpA for a stake in a gas project in Mozambique valued at as much as $4 billion, according to two people with knowledge of the matter. The deal would rank as the biggest overseas investment made by CNPC or PetroChina, according to data compiled by Bloomberg.

PetroChina also has bought stakes in energy assets in Canada, including a $1.18-billion purchase of shale acreage from Encana Corp. in Alberta in December.